Part D Mandatory Rebates Included In Speaker Boehner’s “Fiscal Cliff” Offer
This article was originally published in The Pink Sheet Daily
Executive Summary
House Speaker John Boehner made an offer to President Obama Dec. 3 to base a resolution to the looming fiscal cliff on a proposal by the president’s deficit commission headed by Erskine Bowles and Alan Simpson, a proposal that included a mandatory rebate on drugs used in Medicare Part D.
A proposal to mandate rebates on drugs used in Medicare Part D is making a comeback through the negotiations on resolving the looming fiscal cliff crisis.
On Dec. 3, House Speaker John Boehner, R-Ohio, sent a letter to President Obama offering to reach middle ground on deficit reduction by bringing back a proposal developed by Erskine Bowles and Alan Simpson when they co-chaired the president’s National Commission on Fiscal Responsibility and Reform in 2010.
Bowles and Simpson considered different forms of a mandatory rebate on Part D drugs while drafting their plan, but the final version included mandated Medicaid-level rebates for drugs used by Part D beneficiaries who are also eligible for Medicaid. Boehner proposes that the Bowles/Simpson plan should form the framework for future negotiations on deficit reductions.
Boehner notes that Bowles presented the proposal to the Joint Select Committee on Deficit Reduction (the so-called “Supercommittee”) at a Nov. 1, 2011 hearing, where he appeared with Simpson. It was the failure of the Supercommittee to reach a solution on the deficit that led to the fiscal cliff situation, where automatic sequestration of the federal budget and increased income taxes are set to hit at the beginning of the year. Sequestration is expected to cut FDA funding by about 8% (Also see "FDA Taking “Risk-Based Approach” To Sequestration Cuts" - Pink Sheet, 3 Oct, 2012.).
Medicare Part D spending would be cut $591 million in 2013 under sequestration, but Medicaid is exempt from sequestration (Also see "Medicare Part D Spending Would Be Cut $591 Mil. In 2013 By Sequester" - Pink Sheet, 14 Sep, 2012.).
Bowles’ and Simpson’s written testimony to the Supercommittee stated that “near term savings would come from health care providers and drug companies through adjustments in payment formulas and increased drug rebates for Medicaid and Medicare.”
The Bowles/Simpson plan, as voted on by the National Commission (it failed to receive the number of votes needed to be put before Congress), included extending the Medicaid drug rebate to include Part D drugs that are used by beneficiaries who are eligible for both programs (Also see "Fiscal Commission's Final Plan Includes Rebates On Drugs Used By Medicare/Medicaid Dual Eligibles" - Pink Sheet, 1 Dec, 2010.).
An earlier draft of the plan made a more general mandate for rebates on brand-name drugs as a condition of participating in Part D drugs, estimated to generate government revenue of $59 billion over 10 years (Also see "Mandatory Part D Drug Rebates Proposed By Deficit Panel Leaders; Stronger IPAB Also On The Table" - Pink Sheet, 10 Nov, 2010.).
IPAB Would Be Stronger
The Bowles/Simpson plan also included strengthening the Independent Payment Advisory Board (IPAB), which will be created under the Affordable Care Act to recommend Medicare cost-cutting proposals that will be fast-tracked through Congress.
The pharmaceutical industry has long opposed mandating rebates in Part D as well as the creation of IPAB. While making a number of payment concessions in ACA such as an annual fee, higher drug rebates in Medicaid and a 50% on brand drugs used in the Part D coverage gap, the industry was successful in lobbying to keep mandatory Part D rebates out of ACA.
By proposing the Bowles/Simpson approach, Boehner is pushing Obama for a bipartisan compromise, since Obama himself created the National Commission through an executive order and appointed Bowles, who was President Clinton’s chief of staff, and Simpson, a former Republican senator from Wyoming, as co-chairs. In his letter, Boehner refers to the plan by using the name of the Democratic co-chair who was involved in drafting the plan.
Boehner wrote that Bowles’ proposal “is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require entitlement reform. Indeed, the Bowles plan is exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs. We believe it warrants immediate consideration.”
“If you are agreeable to this framework, we are ready and eager to begin discussions about how to structure these reforms,” the letter says. It asks the president to respond to the letter “in a timely fashion.”